NPRA Annual Meeting 2003
Effects of Feed Quality and Effects of Feed Quality and Product Specification Changes on Product Specification Changes on
Refined Product SupplyRefined Product Supply
Joanne ShoreJohn Hackworth
Energy Information Administration
NPRA Annual MeetingSan Antonio, Texas
March 2003
www.eia.doe.gov
NPRA Annual Meeting 2003
Petroleum Product Supply Affected By Petroleum Product Supply Affected By Numerous FactorsNumerous Factors
Changing Product Specifications
Changing Feed Quality
Capacity Changes Petroleum Refined Product Supply
Technology
Imports
NPRA Annual Meeting 2003
U.S. Refining Capacity: Where We Are TodayU.S. Refining Capacity: Where We Are Today
02468
10121416182019
73
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
Mill
ion
Bar
rels
Per
Cal
anda
r Day
U.S. Operable Capacity & Gross Inputs
Operable Capacity
Gross Inputs
Source: EIA
NPRA Annual Meeting 2003
Domestic Capacity Is Expected To GrowDomestic Capacity Is Expected To Grow
Source: EIA
Time PeriodAnnual Average
Shutdown Capacity(MB/CD)
Average Annual Growth of
Continuously Operating Capacity
(MB/CD)
1990-1995 139 76
1995-2000 96 324
2000-2007 60 346
Historical shutdowns are for years 1990-1994, 1995-1999.
NPRA Annual Meeting 2003
Gasoline Imports Are Important Source of Gasoline Imports Are Important Source of Supply for East CoastSupply for East Coast
0100200300400500600700800900
1990
1992
1994
1996
1998
2000
2002
Thou
sand
Bar
rels
Per
Day Other
WesternEurope
Canada
Venezuela
VirginIslands
Gasoline Imports to PADDs 1-3Jan-Nov
Source: EIA
NPRA Annual Meeting 2003
Changing Feedstocks: Any Signs of Supply Changing Feedstocks: Any Signs of Supply Impacts?Impacts?
• Growing use of heavier crude oils impact on light product yields
• Historical changes in the use of C4’s, C5’s and oxygenates in gasoline
NPRA Annual Meeting 2003
Heavier Crude Oils Accounted for Import Heavier Crude Oils Accounted for Import GrowthGrowth
01,0002,0003,0004,0005,0006,0007,0008,0009,000
10,00019
86
1988
1990
1992
1994
1996
1998
2000
Thou
sand
Bar
rels
Per
Day
Approximate Quality Mix of U.S. Crude Oil Imports
Light Sweet
Mixed
Medium to Heavy Sour
Source: EIA
NPRA Annual Meeting 2003
U.S. Refinery Input QualityU.S. Refinery Input Quality
30.030.531.031.532.032.533.033.534.034.535.0
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
API
Gra
vity
, Deg
rees
0.85
0.97
1.09
1.21
1.33
1.45
Sulfu
r Con
tent
, Wt %
API Gravity Sulfur
Source: EIA
NPRA Annual Meeting 2003
Rapid Growth in Bottoms Processing for Rapid Growth in Bottoms Processing for Heavy Sour Crude OilsHeavy Sour Crude Oils
-10%
0%
10%
20%
30%
40%
50%
60%19
87
1989
1991
1993
1995
1999
2001Pe
rcen
t Cha
nge
from
198
7 C
apac
ity
CokingHydrocrackingFCCDistillation
Increases In U.S. Capacity Relative to 1987
Source: EIA – Capacity as of January Each Year
NPRA Annual Meeting 2003
Changes in Light-Product Yields at Changes in Light-Product Yields at Refineries with Coker and Heavy Crude Oils Refineries with Coker and Heavy Crude Oils
ProjectsProjects• Explored changes in refineries adding cokers
between 1998 and 2001
• Looked at two groups with different product yield impacts:
– Group A : Little change in crude gravity, reduction in residual fuel oil yield
– Group B - Large drop in crude gravity, little residual fuel oil to reduce
NPRA Annual Meeting 2003
Before & After Coker AdditionsBefore & After Coker AdditionsGroup A Group B Total
Before After Before After Before After
Crude API Gravity 28.0 26.2 33.1 25.7 29.7 26.0
As Percent Crude & Unfinished
FCC Input 35.0 35.9 36.9 35.4 35.7 35.7
Hydrocracker Input 5.6 5.0 8.1 13.5 6.5 8.2
Coker Input 11.0 21.0 7.5 23.1 9.8 21.8
Pentanes Plus Input 0.3 2.3 2.0 3.9 0.9 2.9
C4+MTBE Input 4.8 3.4 5.2 4.6 5.0 3.9
Yield Adj Mogas: % C+U 45.9 43.8 48.9 46.2 46.9 44.7
Yield Distillate: % C+U 31.2 35.8 36.0 35.4 32.9 35.6
Yield Light Prod: % C+U 78.8 81.2 88.5 84.1 82.3 82.2
Yield Residual: % C+U 8.1 3.1 1.7 1.2 5.8 2.4
NOTE: Group A: 4 refineries, 140 MB/D coking capacity added; Group B: 4 refineries, 130 MB/D coking added. Gasoline yield is adjusted by removing contributions from C4, C5 and oxygenate blend components so that yields reflect only gasoline product derived from crude oil and unfinished feedstocks (C+U).
NPRA Annual Meeting 2003
Oxygenates, C4’s and C5’s Contribute Oxygenates, C4’s and C5’s Contribute Significant Volumes to Gasoline Production Significant Volumes to Gasoline Production
0100200300400500600700800
1986
1988
1990
1992
1994
1996
1998
2000
Thou
sand
Bar
rels
Per
Day
Oxygenates
Pentanes Plus
RefineryButane
NGL Butane
Annual Average Refinery Inputs
Source: EIA
NPRA Annual Meeting 2003
Flat Crude-Based Gasoline YieldFlat Crude-Based Gasoline Yield
25
30
35
40
45
50
5519
86
1988
1990
1992
1994
1996
1998
2000
Perc
ent
TotalGasoline
Gasolinefrom C&U
Distillate,Jet, Kero
Yields as Percent of Crude and Unfinished Oils
Source: EIA
NPRA Annual Meeting 2003
New Regulatory Supply ImpactsNew Regulatory Supply Impacts
• MTBE/Ether Bans
• MSAT with MTBE Bans
• ULSD
NPRA Annual Meeting 2003
Losing MTBE – Not Just MTBE Volume Loss Losing MTBE – Not Just MTBE Volume Loss
• MTBE represents over 10% RFG, 3% total gasoline supply.
• But physical & chemical properties are critical factors.
• No other hydrocarbon or alcohol can equal the emission and engine performance characteristics of MTBE and other ethers.
NPRA Annual Meeting 2003
MTBE and Ethanol Property ComparisonMTBE and Ethanol Property Comparison
• Both good octane and clean relative to other gasoline components
• Issue is Ethanol relative to MTBE:– Higher oxygen content, so less volume needed for RFG
oxygen requirement (5.8% v. 11.2% for MTBE)– Higher blending RVP than MTBE (VOCs problem)– Higher toxics than MTBE (MSAT issue)– Higher NOx in California model, not Federal model
NPRA Annual Meeting 2003
2007 Loss of Volumes When Moving from 2007 Loss of Volumes When Moving from MTBE to Ethanol – Add Backs MTBE to Ethanol – Add Backs
(Constant Inputs, MB/D)(Constant Inputs, MB/D)
PADD 1(1)
PADD 2
PADD 3
PADD 5
Total U.S.
Loss of MTBE Volumes -100 0 -93 -113 -306
Addition of Ethanol to RFG
75 0 18 58 151
Refinery Increased Alkylate Production
9 10 71 17 107
Commercial Alkylate or Iso-Octane Production
0 0 25 10 35
Net Before Other Losses
-16 10 21 -28 -13
(1) Assumes MSAT volume issues are resolved and rule does not hinder RFG production.
Source: EIA
NPRA Annual Meeting 2003
2007 Loss of Volumes When Moving from 2007 Loss of Volumes When Moving from MTBE to Ethanol – Further Losses MTBE to Ethanol – Further Losses
(Constant Inputs, MB/D)(Constant Inputs, MB/D)
PADD 1(1)
PADD 2
PADD 3
PADD 5
Total U.S.
Net Before Other Losses
-16 10 21 -28 -13
Reduction in Light Ends for RVP
-25 0 -38 -50 -113
Reduce Heavy Ends for Distillation Points
-14 0 -9 -17 -40
Added Ethanol in Conventional
0 -20 0 0 -20
Total -55 -10 -26 -95 -186
(1) Assume MSAT volume issues are resolved and rule does not hinder RFG production
Source: EIA
NPRA Annual Meeting 2003
The MSAT Issue Concerning Ethanol The MSAT Issue Concerning Ethanol (Complex Model)(Complex Model)
BlendComponent Share
(Percent)
Emission Reduction from Industry Baseline
(Percent Reduction)
Volume Percent
Oxygen-ate
Hydro-carbons MTBE Ethanol VOC Toxics NOx Benzene
MTBE 88.8 11.2 0 25.9 33.4 8.1 0.3
Ethanol 1 94.2 0 5.8 15.5 28.3 7.2 0.4
Ethanol 2 90.0 0 10.0 18.6 28.8 7.9 0.3
Note: Fractions of specific components in the hydrocarbon blend are the same in all cases. Emissions reductions are based on comparisons to 1990 industry average baseline fuel composition.
Source: EIA
NPRA Annual Meeting 2003
ULSD - The Lower the Sulfur and the Higher ULSD - The Lower the Sulfur and the Higher the Volume the Greater the Costthe Volume the Greater the Cost
0
2
4
6
8
10
12
14
0 500 1000 1500 2000 2500
Diesel Production (Thousand Barrels Per Day)
Cen
ts P
er G
allo
n
Refinery Production Cost Curve PADDs 1-480% Highway Demand in 2006
Source: EIA
NPRA Annual Meeting 2003
Potential Regulatory ChangesPotential Regulatory Changes
• More ULSD (off-road)
• More diesel light duty vehicles (diesel quality and volume issues)
• Increased ethanol use (mandated or otherwise)
• Other product clean up (sulfur reduction jet fuel, home heating oil)
NPRA Annual Meeting 2003
Increased U.S. Light Duty Diesel Fuel Use?Increased U.S. Light Duty Diesel Fuel Use?
U.S.
98%
2%
Gasoline Diesel
Europe
64%
36%
Gasoline Diesel
2001 New Retail Sales Light Duty Vehicles
Sources: US Chart -- ORNL Investigation of Class 2bTrucks, March 2002 & EIA Estimates; Europe Chart -- ACEA
NPRA Annual Meeting 2003
Proposed Renewable Fuel StandardProposed Renewable Fuel Standard1.
4
1.4 1.7 1.7 2.1
0.00.51.01.52.02.53.03.54.04.55.0
Bill
ion
Gal
lons
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Historical Ethanol Use and RFS Requirements
RFS Required Volumes
Source: EIA, Monthly Oxygenate Survey and H.R. 4
NPRA Annual Meeting 2003
Elimination of RVP Waiver Diminishes Elimination of RVP Waiver Diminishes Ethanol Supply ContributionEthanol Supply Contribution
Volume and Energy Effects to Adjust for RVP When Adding Ethanol to Make 10% Blend
RVP (psi)
Volume Increase (Decrease) By Adding
Ethanol
Energy Increase (Decrease) By Adding
Ethanol
With RVP Waiver
Without RVP
Waiver
With RVP Waiver
Without RVP
Waiver
9.0 11.1% 7.5% 7.5% 4.5%
7.8 10.3% 2.2% 6.8% -0.2%
7.0 8.3% -0.9% 5.1% -2.8%
Source: EIA
NPRA Annual Meeting 2003
Results of Tighter Product Specs and Results of Tighter Product Specs and Greater Refinery ComplexityGreater Refinery Complexity
• Increased likelihood of outages– Single unit outage has greater impact on product
production– Decrease in maximum achievable utilization
• Diminished yields of prime fuels per barrel of crude oil
• Greater “stay-in-business” investment hurdle for smaller refiners
NPRA Annual Meeting 2003
Summary: Impacts of Feedstock ChangesSummary: Impacts of Feedstock Changes
• Fewer heavy crude projects, but will result in some light-product yield loss
• Reduced ability to use light components (C4’s & C5’s) and MTBE will reduce gasoline yield per barrel of crude input
NPRA Annual Meeting 2003
Summary: Potential Regulatory Impacts on Summary: Potential Regulatory Impacts on GasolineGasoline
• Ether Bans Largest supply challenge with significant RFG production loss, exacerbated by MSAT (Loss of MTBE, C4’s C5’s exceeds ethanol additions)
• RFS Adds some volume, but loss of 1-lb RVP waiver reverses some of that gain
• Import streams meeting RFG specifications likely to become harder to find and more expensive
• More distinct gasoline types adding to distribution system stress
NPRA Annual Meeting 2003
Summary: Potential Regulatory Impacts on Summary: Potential Regulatory Impacts on DieselDiesel
• ULSD High and widely varying costs of production and new technology may cause some refiners to delay implementation & create shortages initially
• Possible increase in light duty diesel vehicles More ULSD volume and near-term quality improvements that increase refining challenges
• Distribution losses with ultra-clean products is a challenging unknown
NPRA Annual Meeting 2003
Conclusion: Challenging Environment Conclusion: Challenging Environment Implies Tight Market Years AheadImplies Tight Market Years Ahead
Light Product Yield• Feedstock changes – Loss
of light product yield
• Product spec changes – Net loss of light product yield
Capacity• Need more capacity to
meet demand, yield loss, potential lower utilizations
• Pressures to increase:– Demand growth– Higher import prices
• Pressures hindering expansion– Resources limited to spec
changes– Margins– Shutdowns